Explainer: Sorting Through the State’s Property-Tax Relief Programs

The bad news is that the amount of money available for property-tax relief is shrinking; the good news, there are still a plethora of programs and options available

Once a top priority for government leaders in Trenton, property-tax rebates and other direct-relief programs received nearly $3 billion in funding from the state budget a decade ago.

But this year, with Gov. Chris Christie proposing a $32.5 million reduction in funding for direct property-tax relief in his latest state budget proposal, the total will be just over $1 billion unless lawmakers can convince him to allow for an increase before the next fiscal year begins in July.

The reduction comes as Christie, a second-term Republican, in recent years has instead been using revenue growth to ramp up state contributions to the public-employee pension system, which has been another top priority for Democrats who control the Legislature. Christie has also pointed to his efforts to address property-tax increases at their root, including the 2 percent cap on annual property-tax hikes that he and lawmakers passed on a bipartisan basis in 2010.

Still, data released recently by the state Department of Community Affairs showed the average New Jersey property-tax bill rose to a record high of $8,549 last year, putting new heat on lawmakers to more fully address property taxes as they prepare to run for reelection this year with all 120 legislative seats on the ballot in November.

Homestead Benefit: Christie turned the Homestead Benefit, the state’s most popular rebate program, into a direct credit on property-tax bills shortly after taking office in early 2010. Under his new budget proposal, the Homestead program will see the biggest hit, losing $30.6 million, according to budget documents.

To qualify for Homestead credits, homeowners can earn up to a maximum of $75,000 annually, or up to $150,000 for seniors and disabled homeowners. Christie’s fiscal year 2018 budget expects to provide credits worth an average of $511 to 423,300 seniors and disabled homeowners making up to $150,000; and credits worth an average of $397 to 169,500 other homeowners making up to $75,000. The current state budget anticipates paying credits worth an average of $515 to 443,300 seniors and disabled homeowners making up to $150,000; and credits worth an average of $401 to 209,500 homeowners making up to $75,000.

Christie hasn’t enacted any changes about who can qualify for Homestead credits even as the program’s enrollment numbers and funding have dropped in recent years. Instead, his administration has attributed the changes to more homeowners earning a higher income than the program allows as the overall state economy has improved, something known as “bracket creep.”

Senior freeze: Also seeing a slight decline in state funding without any change to overall program requirements is the Property Tax Reimbursement Program. The program is commonly referred to as “senior freeze” because it has traditionally used state-funded reimbursement checks to effectively freeze property-tax bills each year for thousands of longtime New Jersey residents. In all, Christie’s budget proposal calls for the program to lose about $4.5 million during the 2018 fiscal year.

To qualify for the program, which started in 1997, homeowners must be at least 65 years old or disabled, and be at least a 10-year resident of the state. They also have to be the owners of their residence for the past three years and be up to date on their property taxes. For the past several years, budget language approved by Christie and lawmakers has frozen the program’s annual income ceiling at $70,000 despite state law that calls for regular increases to keep pace with inflation.

Lawmakers, meanwhile, have also been advancing legislation that would see the checks turned into a direct credit on property-tax bills for most enrollees.

Property-tax deduction: One direct property-tax relief program that is bucking the trend of declining state funding is the oft-overlooked property-tax deduction, a program that allows New Jersey residents to deduct some or even all of their property-tax bills from their overall state income-tax liability. Christie’s fiscal 2018 budget proposal provides $462.2 million to pay for the deductions, a slight increase of $6.4 million over the FY2017 spending plan.

Under a law passed in 1996, homeowners can deduct up to $10,000 paid in property taxes or the rental equivalent paid by tenants. Unlike other state property-tax relief programs, there is no income ceiling for the deduction, though homeowners who make Payments in Lieu of Taxes, or PILOTs, are not allowed to take the deduction.

Other relief programs: The state budget also provides modest funding for two smaller property-tax relief programs that benefit qualified veterans, and seniors and disabled homeowners. Christie’s fiscal 2018 budget proposal includes $48.5 million for the veterans property tax deduction, down slightly from the $51.2 million in the current budget, and $9.9 million for the senior citizens and disabled homeowners deduction, down $1 million from the current budget. No changes to those programs’ eligibility rules are expected during the new fiscal year.